Cushing trends last week
The EIA (U.S. Energy Information Administration) reported that Cushing inventories fell by 514,000 barrels, down to 61.7 million barrels in the week ended April 24. Crude stocks at Cushing had been on the rise since November 2014. Since April, however, the pace of this increase has slowed down.
The reversal in the upward trend boosted WTI (West Texas Intermediate) prices to a four-month high of $58.58 on Wednesday, 2.7% higher than the previous day’s close. For more on this topic, read Crude Oil Prices Touch Four-Month High Last Week.
Cushing hit ~87% of its storage capacity in the previous week, pressuring WTI prices. The highest capacity record at Cushing is 91%, set in March 2011.
2015 versus 2014 inventories
Unlike 2015, inventories in 2014 consistently fell before turning upward toward the latter part of the year. The decline in 2014 was mostly a result of new infrastructure coming online, which enabled more crude to move out of Cushing.
This new infrastructure includes TransCanada’s (TRP) Keystone XL Pipeline and Cushing Marketlink Pipeline. Magellan Midstream Partners’ (MMP) Longhorn Pipeline, and Enterprise Products Partners’ (EPD) and Enbridge’s (ENB) joint venture Seaway Pipeline also came on line last year.
What reversed the trend?
Just as new pipelines helped drain crude from Cushing, other new pipelines helped bring more crude into Cushing and refill stocks there. This occurred mostly in the latter part of 2014.
One of these feeder pipelines is the Pony Express, operated by Tallgrass Energy Partners (TEP). Enbridge’s (ENB) Flanagan South Pipeline Project runs from Flanagan, Illinois, to Cushing. It started shipping crude in December 2014.
Cushing, Oklahoma, is the delivery point for NYMEX (New York Mercantile Exchange) crude futures contracts. A buildup of inventories at Cushing pressures WTI (West Texas Intermediate) crude prices downward, and vice versa.
Movements in crude prices affect oil producers such as Chevron (CVX), Pioneer Resources (PXD), Cimarex Energy (XEC), and Marathon Oil (MRO). All of these companies are components of the iShares Global Energy ETF (IXC) and make up ~10% of the ETF.
In the next part of this series, we’ll look at refinery input trends.